Home Buyers Guide

Frequently Asked Questions

What are the advantages of home ownership?
For many people, the motivating factor in purchasing a house is the satisfaction in knowing that the home you live in belongs to you. In addtion, real estate can often be a very sound investment. Buying the right place, or buying at the right time, can prove to be very rewarding financially. Property can appreciate in value, and down the road, homeowners may stand to make a considerable amount of money.

Instead of spending money on rent that won’t earn any tax savings, you could be enjoying considerable tax savings with a mortgage loan. Generally, the interest you pay on a mortgage is deductible. (Consult your tax advisor.) This could mean substantial money returned to you each year. Owning a home could also allow you to borrow against the house or convert your interest into cash by selling the house.

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What do I need when I apply for a mortgage loan?

1. The signed purchase contract
2. A receipt for earnest money on deposit with the seller or escrow company (if not included in your purchase contract)
3. Proof of income - Bring stub from last paycheck, W-2 forms for last two years. If you’re a two-income household, bring documents for both of you. If self-employed, bring copies of the last two years’ tax returns and year-to-date profit/loss statement
4. The last 2 months of statements for all checking, savings, and deposit accounts
5. Stock/bond statements
6. If you’re divorced, copy of divorce decree and proof of receipt of payment for alimony and/or child support (i.e. bank statements showing deposits, history of payment from clerk of court)
7. If refinancing, a copy of your most recent real estate tax bill showing the estimated fair market value of the house
8. A completed real estate mortgage application

Will I be able to get a mortgage if I don’t have a large downpayment?
While 20 percent is still what is expected these days, it's not uncommon for homebuyers to put down 5 percent or less. Under the right circumstances, you might need very little - or nothing at all - for a down payment. There are many programs out there that have done a great job of getting many people into a home of their own. However, there are a fair number of restrictions on who and which properties qualify for help. Eligibility criteria can include things like annual income, home price and location, and whether or not you've owned a home before.

Unless you do qualify for one of these special programs, you should plan on coming up with at least 5 percent down. This money can come from can come from your savings, checking, mutual funds, CD's, gift money, etc.

What is Earnest Money?
Earnest money is sum of cash paid to a seller by a buyer prior to the closing to show that the buyer is serious about buying the house. The earnest money is deducted from the purchase price at closing and is not an additional cost.

What are the advantages of having a mortgage with CoVantage Credit Union?

1. No Points to Pay
2. Loans Kept Local – Local Service, Convenient Payments, Talk to a Credit Union Loan Officer at Any Time
3. Payments are credited the same day they are received
4. No Pre-payment Penalties
5. Automatic Payment Options – Payroll Deduction, Automatic Transfer from Savings or Checking, ACH
6. Loan Interest Rebate – Although not guaranteed, a loan interest rebate has been paid for the past 24 years.
7. Weekly or Bi-Monthly Payment options available
8. Credit Life Insurance and Disability Insurance is available to protect your investment.
9. 24 Hour Audio Response and Internet Home Banking Service
10. Complete, one-stop Financial Service

*FOR ILLUSTRATIVE PURPOSES: A 30 year $70,000 loan at 6.25%APR, the monthly payment is $431.26 or a total of $155,243.34. If instead you pay $107.82 per week, the loan could be paid off in 24.2 years with the total paid being $135,542.88. Result of weekly payment option: Savings of $19,700.46 and mortgage paid off 5.8 years earlier.

What are points?
A point is 1% of your home loan amount. It's typically paid up front to the lender in order to lower the interest rate on your home loan. So, usually the more you pay up front in "points", the lower your home loan interest will be. When dealing with points, you will have to figure out what's more important to your particular situation: paying more now or paying more later as you make your payments. CoVantage Credit Union does not offer points to pay.

Is a buyer able to make early or extra payments towards the principle (amount borrowed)?
Prepayment can shorten the length of the mortgage and lower the total interest. However, lenders may change a penalty if you pay off the mortgage quickly, usually in the first few years. Be sure to ask about prepayment conditions in your mortgage. There are no prepayment penalties for a CoVantage Credit Union mortgage.

If the lender is ordering an appraisal for home purchase, is a home inspection also required?
Do not confuse an appraiser with a certified home inspector. Unlike an appraisal, a home inspection is not required to get a mortgage loan; however, it may be beneficial to get a detailed report of the condition of the property. An inspection is done to evaluate the structure of the home, providing feedback about the structural components, including the roof, heating system, plumbing, and electrical system. Other obvious interior or exterior damage that could affect the salability of the property will also be reported. The inspector generally performs a detailed inspection and can educate you about possible concerns or defects with the home. It is a good idea to accompany the inspector during the home inspection. This is your opportunity to gain knowledge of major systems, appliances and fixtures, learn maintenance schedules and tips, and to ask questions about the condition of the home. The home inspection is ordered and paid for by the potential buyers themselves and usually done before a final agreement to purchase the home is made. The cost of a home inspection is around $250 but may be worth it if you find out the home you are about to buy is in poor condition.

What happens at the loan closing?
The closing may take place at a local CoVantage Credit Union branch, a title company or attorney's office in your area. If you are purchasing a new home, the seller may also be at the closing to transfer ownership to you, but in some instances, these two events happen separately.

During the closing you will be reviewing and signing several loan papers. The closing agent or attorney conducting the closing should be able to answer any questions you have or you can feel free to contact your Loan Officer if you prefer.